Mumbai: NuPower Renewables Ltd , a Mumbai-based wind energy firm, has raised Rs. 750 crore via a 12-year term loan from Punjab National Bank ( PNB ), according to two persons with direct knowledge of the issue but who declined to be named.
The firm, jointly promoted by Deepak Kochhar and Mumbai-based Supreme Energy Pvt. Ltd , plans to use the money to implement a 150 megawatts (MW) wind power project in Tamil Nadu and expand its capacity.
A spokesman for NuPower, Umanath Nayak, said the company is still in discussions with PNB to finalize the interest rate, but one of the persons cited above said, “PNB is the main underwriter for the loan and the interest rate is around 14.75% per annum.”
He added that the company raised the loan considering a set-up cost of Rs.7.5 crore per MW, though analysts say the cost for setting up a wind power project typically is Rs.5-6 crore per MW.
Ratings agency CARE assigned a “BBB” rating for NuPower’s long-term loans, citing a favourable policy environment for the renewable energy sector and the implementation of partial capacity that reduces project risk. Of the total capacity of 150MW that NuPower plans to install in Tamil Nadu, 48MW has been commissioned already, CARE said in a report in May.
NuPower has wind farms in Tamil Nadu, Karnataka and Rajasthan. Set up in 2008, it has an overall power generation capacity of 150MW now, Nayak said.
The firm produces power for sale to end-users. The government allows such private firms to produce electricity independently in an effort to increase the power production in the country.
Overall power production in India was 205.34 gigawatts as on 30 June, according to the Central Electricity Authority.
A couple of months ago, NuPower raised about Rs.300 crore through a stake sale to a private equity (PE) investor. “The company shall seek additional equity as and when the need arises,” Nayak said but declined to name the PE investor. “NuPower plans to have total installed capacity of 1,000MW in the medium term,” he said.
According to the unnamed persons mentioned earlier, the firm is also considering a technical partnership with a German firm for turbine manufacturing.
NuPower declined to divulge details on this.
In India, a majority of the wind power projects are in Gujarat and Tamil Nadu. While analysts say power projects fired by renewable resources are growing in number, thermal power continues to contribute to about 66% of the country’s power production.
Analysts say it is difficult for wind energy companies to raise even small sums as investors are hesitant about the revenue stream of these companies as they have tie-ups with ailing state electricity boards. Considering the poor investor appetite for this sector, the amount raised by NuPower is substantial.
“Although India has a huge potential for generating power through renewable energy sources, as on date, the generation of power from renewable energy sources forms a small percentage of the total energy production,” said Archana Hingorani, chief executive and executive director, IL&FS private equity.
Investors are more agreeable to put money in companies that generate power using a mix of traditional and renewable energy resources, she explained.
The revenue stream and seasonal nature of the business also affects investor sentiment. “The revenue stream can be affected due to payments getting stuck with state electricity boards. The tariff structure is also not uniform across states,” said V. Srinivasan, power sector analyst at Angel Broking Ltd.
The wind direction changes seasonally, which can effect power production adversely, he added.
Quite a few wind energy firms have been seeking funds from PEs. ReGen Powertech Pvt. Ltd, a Chennai-based wind turbine manufacturer, raised about Rs.52 crore from TVS Capital and M-Cap Advisors in May.
The Hindu-Business Line and The Economic Times reported that International Finance Corp., the financing arm of the World Bank, was looking to invest about $130 million in Noida-based Inox Renewables Ltd, which has wind power projects in Gujarat and Rajasthan.